Pittsburghers know that the times are out of joint. Somehow they're expecting the prosperity to blow up in their faces.
Fortune Magazine, 1941

Monday, April 05, 2010

Pittsburgh 2 degrees rule - pension edition

The newsheadlines last week actually had the one big number to come out of the biennial reports on the city's pension system. A shade under an even billion dollars in total pension liability. For a city of 300K people and less than 150K households that is a lot. Ho hum it would seem as far as how much notice it really got. I suspect opening day of a baseball team predicted to lose over a hundred games will generate an order of magnitude more interest. Who says this isn't a baseball town?

Is not the state of the city's pension system the single biggest policy issue impacting the city of Pittsburgh now and into the future? Not just the size of the liability, but it's intractability that makes it issue #1. Nowadays it is driving the entire effort to monetize all of the parking assets currently owned by the Pittsburgh Parking Authority. Impacts go beyond the city of course. Just one example: Legacy costs facing the city of Pittbsurgh may be the single biggest thing in the way of further city county consolidation and a host of other things that can't be addressed as long as there is a billion dollar elephant in the room. I say it all ties together. I want to make one of those omnibus schematics that are in vogue to show how all the financial problems in the region are connected.... but that is beyond me for the moment.

Yet for what is arguably the biggest policy issue in town... how much does anyone really ever know about the pension system? I challenge anyone to find much useful information on the pension system on the city web site. You may have to work harder than you should just to find any the web page for the pension system at all.. and when you do there isn't much there that has been updated in 3 years, or so it seems to me. We are now, and have been for some time, way behind that paragon of fiscal responsibility: Detroit, in terms of how much transprency the pension system has. I've pointed out before the web site of the Retirement Systems of the City of Detroit. Lots of info there down to the minutes of their pension board meetings, a recent annual report, even all their past auditor's reports. Anything remotely like that here? For just about any local government around? I know there are some, but not many.

Look at the Detroit site. It shows that transparency is not about funky web sites, nor gimmicky of any kind. I actually suspect that Detroit page was written in MS Front Page or something equally dated. Yet it has infinitely more data on it than what we have here.

Anyway. Could go on forever on the numbers themselves. All that is just my preface to the longer wonkish jeremiad that needs to be written. I've updated most of my iPension page for those who want the gory details on the state of the city's pension system. Could obsess on each chart I suppose. Some other day.

I've said it before, but I'll say it again. It's a web site that ought not to exist. There is nothing there that the city couldn't put online tomorrow if it wanted to with no more cost than a few hours of an intern's time. Beyond that and for the moment those numbers will have to mostly speak for themselves.

It is distressing that, if today's P-G is to be believed, there will soon be more transparency about Allegheny County restaurant inspections than local pension funds.

Talk about whistling past the graveyard.

You would think that, even if the political class thinks it in their best interest to maintain secrecy on pensions, the public service unions would want this information public for the benefit of its members. Isn't a lack of oversight how the autoworkers ended up owning Chrysler and GM (along with the government)? Or how steelworkers ended up with cents on the dollar of their pensions from Beth Steel and LTV?

Face it, Pittsburgh is broke and must declare bankruptcy, and only then can have their liabilities like their pension fund renegotiated, as well as all the union contracts renegotiated. Is it any wonder the city is in the mess they are now, given all the hefty wage increases and concessions to to the unions over the years?

It's not just Pittsburgh, mind you, but it's every city in this country and every state as well. No place has full funding of pensions and no place has had the balls to stand up to unions until now. I wish Pittsburgh's mayor and governor had the balls of Gov. Christie over in New Jersey to stand up to the unions and call them parasites they are. If you don't believe me, check out Mish's blog at:

Great stuff in it. I love Pittsburgh and hope that they eventually do the right thing. Bankruptcy is not bad, just a means to an end, and a better future, if they only had the political will to tackle the problems head on.

You are absolutely right, but trust me the unions are as greedy as anybody and trust me they are out for their own interests and do not care if and how us citizens can pay for their benefits. Why is it that they get better benefits than private employees working for private organizations? Why do they feel they deserve pay raises during the worst recession since the Great Depression? Tell me how you manage your way out of a billion dollar hole in the pension fund?

Most Pittsburgh public service employees don't make a lot of money relative to their suburban peers or similarly educated private sector employees. Their job is dangerous, thankless and the health and retirement benefits they receive are the key component of their compensation.

If you want to work your way our of the pension problem you definitely don't start by compounding the problem with the sale/lease of your strongest assets to the "private sector". They, more than anyone, are out for their own interests and will leverage the public asset for their own benefit without a second thought of how their actions will negatively impact the few remaining taxpaying businesses in the city.

Folks do misconstrue some of these arguments. Lots of stories from other places of exorbitant public pensions and the costs that bears.. and just presume that is the the issue here. Like many things the Pittsburgh story is just not an extrapolation of what is going on elsewhere. We could argue the point a bit, but most City of Pittsburgh pensioners are not getting much.

More extreme than most any other place the problem here is that Pittsburgh was once much bigger and now the ratio of retirees to current workers is higher than is conceivable most anywhere else.

The problem is that for years there was just no money put away for paying for any of these benefits and even in recent decades the amount has never been enough. Citizens, as amorphouse as that is since we are all citizens, just were content to let that go on for decades and thus we are at where we are at. Citizens may not always be able to be at the forefront of all issues, and pension math may be an extreme case of out of sight and out of mind.. but that pols were generally willing to let this problem fester is a topic unto itself.

These sorts of arguments would be simpler if (1) the City's website provided transparent, accessible information regarding pension funding and expenditures (2) the City promulgated and provided performance objectives for public sector unions and (3) public pensioners recognized that they provide a public service and incorporated such recognition into their political dealings.

No one is comfortable investing in the private market without transparency about where their money is going and a clear indication of how success is to be measured. Why should the public sector be different?

The City asks current taxpayers to sacrifice more public assets and potentially choke investment in downtown without a clear sign that it understands and can communicate cash flow and financing. Management and the administration owe it to BOTH taxpayers and current unions to be clearer about the numbers.

I would have no problem with local pensioners being the highest paid in the country if they were the best performers. How are taxpayers to know?

Thank You a ton for writing such a wonderful piece of information. Keep sharing such ideas in the future as well. This was actually what I was looking for, and I am glad to came here! Thanks for sharing the such information with us.